Contemporary Waqf Administration And Development In Singapore:

Challenges And Prospects

CONTEMPORARY
WAQF
ADMINISTRATION
AND DEVELOPMENT
IN SINGAPORE:
CHALLENGES AND
PROSPECTS

By

Shamsiah Abdul Karim

Islamic Religious Council of Singapore
(MUIS)

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 Contemporary Waqf Administration And Development In Singapore:
Challenges And Prospects

CONTEMPORARY WAQF
ADMINISTRATION AND
DEVELOPMENT IN SINGAPORE:
CHALLENGES AND PROSPECTS

Shamsiah Abdul Karim

Islamic Religious Council of Singapore
(MUIS)

INTRODUCTION

The likeness of those who spend their wealth in the way of Allah, is as the
likeness of a grain ( of corn) ; it grows seven ears, and each ear has a
hundred grains. Allah gives manifold increase to whom He wills. And
Allah is All-Sufficient for His creatures’ needs, All-Knower. (Al – Baqarah
: 261)

Islam propagates the spending of ones wealth in the way of Allah and
promises multi fold reward in return. It is no wonder that the act of
giving one’s wealth to achieve ‘Bir’ or goodness can be traced back in the
time of Rasullullah’s s.a.w as narrated in a Hadith from Ibni Umar
r.a..Rasulullah s.a.w advise that Umar’s land in Khaibar to be converted
as a waqf ( freezing it permanently) , and the fruits from the farm were to
be distributed to the poor and needy, to liberate slaves and for the
wayfarer.

There are many examples in the past on this benevolent Act of creating
Waqf. This paper will discuss in brief the administration, management
and development of waqf in Singapore. The first part of the paper, briefly
describe on the history, and the legal provision of waqf. Next the paper
outline some of the financing options used in the development of waqf and
citing examples of contemporary instruments used to structure waqf, such
as Waqf REITs and Cash Waqf. Lastly, this paper will briefly touch on
the social and religious aspects of the utilization of the waqf income.

DEFINITION OF WAQF IN SINGAPORE

Waqf as defined under Singapore ‘s Administration of Muslim Law Act or

AMLA, is the permanent dedication by a Muslim of any movable or

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 Contemporary Waqf Administration And Development In Singapore:
Challenges And Prospects

immovable property for any purpose recognised by the Muslim Law as

pious, religious and charitable.

By this definition most of the Waqf created is in the form of freehold

properties. There are also Waqf , created from the purchases of shares as
part of the investment in the waqf to generate income for the beneficiaries.

The intention of the waqf for purposes of pious, religious and charitable
offers a considerable degree of latitude when it comes to disbursing income
and identifying beneficiaries. Thus we have waqf, as a charitable
instrument created by Muslims in Singapore that benefits Non-Muslims
as well. This is a clear and practical expression of Rahmatan Lil Alamin,
on the part of Singaporean Muslims in their effort to be mercy to mankind.

HISTORY OF WAQF IN SINGAPORE

Waqf had existed and can be historically traced back since 1826. The first
mosque Omar Kampung Melaka dated 1826 was the first waqf that was
created here in Singapore by Mr. Syed Omar Aljunied, a philanthropist.

Helping the community through the institution of Waqf is synonymous

with the rich Arab and Indian philantrophist , who themselves were
merchants who came to trade and later took residence in Singapore.

These philanthropists will create mosque and bought commercial

properties to be rented out in order to create revenue stream for the
maintenance of the mosque that were built. In essence not only did the
philanthropist created or built mosques, they however also created a
revenue stream (usufruct) to ensure that these mosques have income for
its maintenance and religious activities.

It is worth mentioning that these philanthropists had developed a socio-

religious enterprise model in the early days circa 1850. This concept is
now becoming current in charity and non-profit enterprise literature
today.

PROVISION OF WAQF IN AMLA.

With the creation of The Administration of Muslim Law Act (AMLA) in

1968, and in accordance with Section 58 of AMLA, all awqaf created are
vested in Majlis Ugama Islam Singapura (Muis).

While all awqaf are vested in MUIS, there were however many waqf that
were still managed by the private trustees, then. Problems caused by poor
management and cases of waqf properties sold by trustees without the
knowledge of MUIS, were reported. In order to rectify this problem,

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 Contemporary Waqf Administration And Development In Singapore:
Challenges And Prospects

AMLA was amended again in 1995 to include the registration of Waqf.

Henceforth, all waqf in Singapore are required to be registered in MUIS.

There were only 6 waqf registered in Muis in 1968. By the year 2000, all
waqfs (100) are now registered in Muis. The registration of Waqf has
enabled Muis to have complete database of all waqf properties, revenue,
expenses and disbursement information. This information is crucial for
the effective and efficient management of the waqf.

INCREASING WAQF REVENUE

The effective and efficient management of Waqf assets and properties by

Muis had enabled Waqf revenue to increase exponentially. The first
commercial development of waqf started in 1990 for Wakaf Jabbar. The
vacant land at Duku Road is now transformed into 4 units of terrace
residential housing, increasing the revenue fraom a rental income of $681
to almost $36,0002 per annum.

A bigger project after Duku Road was the Telok Indah properties. This is
situated on the land previously occupied by a mosque and shophouses in
the Kembangan area of Changi Road. The old mosque and dilapidated
shophouses were replaced by a mixed development property, comprising of
a new and bigger mosque, a commercial complex and 20 units of
maisonettes.3

The development was undertaken during 1991, where rent control act had
not been lifted. There were also other challenges to be addressed
including:

1) The need to pay high compensation money to the existing tenant

2) The refusal of some of the tenants to move from their premises
3) The development expertise.

However, through negotiations and palatable proposals given to the

tenants, we have succeeded to resolved the problem. It is definitely not a
smooth and easy task to develop the premises as Muis was a greenhorn in
this business. Being a greenhorn also meant, we took longer to learn the
ropes of the trade and took quite a rough ride in working with the various
development expertise. We then realized that more experts and
professionals in these field needs to be recruited to shorten the turnaround
time and quality of the development. Hence Muis property department
recruited professionals such as civil engineers, architect and quantity
surveyor as part of their team to manage the portfolio professionally. We

1 Source: Annual report -1990

2 Source: Annual report - 2005
3 A two levels apartment.

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 Contemporary Waqf Administration And Development In Singapore:
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will see in the later part of this paper how this structure and the
professional team later evolved to manage more complex development and
management of waqf properties. While the challenges are on the
management expertise and the external regulating factor, the next
challenge that we faced is the various financing options to be adopted.

FINANCING OPTIONS

During this period, all the financing was obtained from Baitulmal4 or
General Endowment Fund managed by Muis. Baitulmal became the joint
venture partner and internal financing was the solution for this $28
million project. The concept of developing the 20 units of massionette
(two-level apartment) and selling it for 99 years was adopted and proceeds
from the sale of these properties had enabled the mosque and the
commercial complex to be developed without using any external financing.

This option was made possible through a fatwa formulated and issued by
the Fatwa committee chaired by the Mufti of Singapore. The Fatwa
Committee opined that it is permissible to sell the commercial or
residential units on a leasehold basis. In essence the freehold property
will still remain with or belong to the waqf and the property is thus
reflected as a reversionary interest in the accounts.

MUIS also adopted joint venture and partnering approach to develop waqf
properties. This approach and method proved to be an effective way to
develop waqf properties, particularly with property prices spiraling
upwards and in land scarce Singapore, the burgeoning economy has make
land a very precious commodity which cannot be left undeveloped.
Through this approach, several redevelopment projects involving
shophouses were carried out and tenants of these shophouses paid for its
renovation.

Another factor for the rapid development of the waqf properties in

Singapore was the lifting of the Rent control act in 2001, as this meant
that, landlords could now charge rental according to market rate.

ASSETS RICH, CASH POOR

There are still a sizeable number of waqf which are still undeveloped,
then. These waqf were asset rich and cash poor. Some of the properties
are located in very prime location.

4 Baitulmal- General Endowment Fund , managed by Muis.

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 Contemporary Waqf Administration And Development In Singapore:
Challenges And Prospects

Due to the high potential of such properties, a more advance and

progressive approach needs to be adopted. Leveraging on the properties is
the solution.

A ‘sukuk’5 structure in the name of Musharakah Bond was then

developed to raise $60 million for 2 projects identified. ( See Annex 1 on
the schematic structure of the musharakah bond)

The term musharakah was used as it is a joint venture between 3 parties ,

ie , Muis- Baitulmal , Warees and the Waqf . The return was secured and
pre-determined through a master-leasing contract that will allow and
ensure that the returns are distributed to the investors. For this case in
point, Ascott Investments Pte Ltd signed a 10- year leasing contract for
the apartment with services for the Bencoolen Street project.

There were many obstacles to clear in order to issue the Musharakah

Bond. During that period, there wasn’t any Islamic capital market issued
in Singapore, what more for a waqf sukuk. While there were issues and
challenges to overcome, we were able to proceed with the help of our
Syariah Advisors, our property consultant, the UOB Assets Management
team. The law firm Allen & Gledhill, helped us document the structure.

The challenges presented to us, include:

1) Documentation of the term return on capital employed which needs to

be documented as interest so as to obtain the QDS ( Qualifying Debt
Securities) 6 concession.

2) Forcing the use of this structure rather than the easier method of
Bai-inah ( sale of debt) or Bai-Bithamin Ajil (sale and leaseback) as
there was no concession on the sale and buy back structure and
hence we are subjected to a very costly double stamp duty .

3) The need to create an SPV (special purpose vehicle), hence additional

requirement adding to the documentation and cost.

4) The very early and infant stage of the Islamic finance structure in
Singapore such as forming the Syariah Panel, understanding the
process and working with the lawyers to document the structure .

The Musharakah Bond was 100% subscribed as Muis being a statutory

board carries a sovereign rating for its certificates issued. The subscribers
for this first Syariah-compliant Musyarakah Bond issued in Singapore
include mosques, statutory boards banks and institutional investors. For

5Sukuk- notes
6QDS- tax concession given for the income received from such investment. If return is
used it will be classified as profit which is subject to income tax.

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 Contemporary Waqf Administration And Development In Singapore:
Challenges And Prospects

the first time a Syariah- compliant fixed income instrument is available in

the market. For this innovation, Muis was awarded the Sheikh
Mohammad Bin Rashid Al Makhtoum Islamic Finance Awards 2006 in
Mar 2006., for the category Regional Continuing Contribution to Islamic
Finance. This innovation has also increased the revenue of the particular
properties from an annual rental of $19,000 per annum in 1995 to an
escalated gross income of $5.3 M in 2006.

CONTEMPORARY INSTRUMENTS FOR

DEVELOPMENT OF WAQF ASSET AND PROPERTIES

We observed rapid development of waqf properties in Mecca, Saudi Arabia

and many in the gulf region. Creative and innovative solutions are used
to expedite these development. The concept of time sharing bond is used
or Sukuk Al- Intifaa’7 . Zam Zam Towers utilized this concept, where the
Towers are constructed in Mecca utilizing a 28 year BOT ( Built ,Operate
and Transfer) contract structure. Purchasers bought the units based on a
28 years leased period ( a specific time) in a specific complex ( the Zam
Zam towers) and in return will be given the revenue stream based on the
return the complex generated.

Hence, there are many creative solutions in the development of waqf

properties. In current properties investment, Real Estate Investment
Trust ( REITs) instrument is a popular route to owning properties as the
structure highly appeals to the investors. Hence such features should also
be explored in the development of waqf properties. With many
uncertainties in the market and with high cost of owning a property, the
idea of property ownership can be converted via the REITs structure.

REITs for the development of waqf should be explored as this approach

can rapidly increase the creation of waqf. Individual investors who wish
to waqf their assets can now participate in this investment as it requires a
low investment outlay.

Muis has creatively made an “internal REITs for its Waqf properties. The
purchase of a 6 –storey office building at 11, Beach Road is an example
where an asset migration exercise was undertaken. Waqf assets with low
value and yield were transferred to a high yielding asset. A pool of waqf
properties now owned a piece of the property at 11 Beach Road in terms of
shareholding.

The net return from the yield of the particular building was then
distributed to the various waqf in terms of the shareholding or

7Extracted from IDB Occassional Paper No.8 – Role of Zakah and Awqaf in poverty
Alleviation, by Dr.Habib Ahmed.

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 Contemporary Waqf Administration And Development In Singapore:
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investments contributed to the whole assets. There are 24 awqaf which

have participated in this structure.

Some of these shareholdings constituted waqf which has been acquired

and is holding cash, these awqaf has been able to be saved from
dissolution by participating in the shareholding of this piece of property.
Previously waqf with a small value such as $10,000 will not be able to
own any property has now made possible by this property ownership.

The option offers advantages including more flexibility in disposing,

exiting and liquidating the assets of the shareholders depending on the
needs of the particular waqf.

We recognized that there are differences in opinion among religious

scholars around the world on the issue of allowing waqf to be created in a
more flexible nature, beyond the traditional property ownership or the
widely practiced waqf that is fixated to one single property.

CASH WAQF

Another form of waqf which is unique here in Singapore, in the form of

cash waqf is the Mosque Building Fund. Each mulsim employee is
required to contribute a stipulated amount to the fund on a monthly basis.
The amount varies as follows:

Contribution table for the Mosque Building and Mendaki Fund

Monthly Gross MBF

Income
Less than $1,001 1.00
$1,001 to $2,000 1.50
$2,001 to $3,000 2.50
$3,001 to $4,000 5.00
$4,001 and above 7.00

Contribution rate: effective 1st July 2005

There are 175,000 muslim employees who contributed towards this fund.
The contribution is deducted from their monthly salary by their employer
and channeled through the CPF ( Central Provident Fund) who acts as our
collecting agent for the contribution. We received an estimated $6 million
annually from this collection. This fund has also enabled us to build 22
mosques with an accumulated amount of $130 million.

In this essence, the act of creating a waqf from a pool of fund to built
mosques from the community has been achieved. Such instruments can

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 Contemporary Waqf Administration And Development In Singapore:
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be modeled and a better instrument could be initiated to include income

streams which will enable the mosque to have a continuous income for the
maintenance and sustenance of the mosque.

THE EFFICIENT ADMINISTRATION AND

MANAGEMENT OF WAQF

In the earlier examples, many initiatives are created to further increase

the revenue of the waqf . Effective and efficient management of waqf is
imperative to obtain greater return and potential for the waqf properties
so as to maximize the social and religious benefits.

Muis saw the necessity to separate the roles for waqf administration and
management. Previously MUIS handled both the management,
regulatory function including overseeing mutawallis and trustees, and at
the same time acting as the developer for all these waqf properties. In
order to be more effective and efficient, and to mitigate further risk from
such ventures, MUIS formed a wholly owned subsidiary, Warees
Investments Pte Ltd 8.

The creation of this corporatised entity is necessary as the portfolio and

the complexities of real estate investments and management of waqf grew.
The creation of Warees allowed more focus, more agility, speed and
creativity and innovative solutions for greater success.

THE ROLE OF WAQF IN SOCIAL AND RELIGIOUS

DEVELOPMENT

Through effective and efficient management of Waqf, MUIS is able to

disburse its return to the beneficiaries. We have also seen a marked
increase in its rental return, as tabled over the 5 years, below:

Returns from Waqf rental over 5 year period9

Years Amount ($)

1990 198,911
1995 1,013,577
2000 3,340,938
2005 4,114,461

Source: Muis Annual Report

8 Warees Investments Pte Ltd – wholly owned subsidiary of Muis formed in year 2000.
9 The gross rental income of waqf for Muis: Source Muis Annula reports

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 Contemporary Waqf Administration And Development In Singapore:
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All waqf, even under the trustee-managed model is audited. The waqf are
required to submit the audited accounts by June of the following year.
The income from waqf constitutes about 15% of the total income managed
by Muis. If the mosque building fund is included as a form of cash waqf ,
it constitute more than one third of the total income managed by Muis.
Waqf by far forms the largest assets in MUIS’ portfolio. Total waqf assets
are valued at about $250 million.10

The disbursement of waqf is also a challenging task as there may be many

varied intention created by the waqif11 . The waqif may ask to disburse
the money overseas for specific intention etc.

Currently MUIS is task to carry out the disbursement functions.

However, MUIS also employ agents to execute these functions.

Complete accounts and waqf database management systems are developed

and installed for an efficient waqf management system. This has led us
to be able to determine and carry out the disbursement exercise efficiently.

Below is the table of amount disbursed by country and by trypes of

allocation.
( Based on FY 2005)

Disbursement by Country

Country %
Singapore 98 %
(Local)
Saudi Arabia 4%
India 2%
Indonesia 2%
Total 100%

From the table above, the distribution to other countries signified the
origin of the the waqif. These philanthropists created waqf not only to help
the community here in Singapore but also repatriated some income for the
welfare of their communities of their country of origin.

Amount allocated By Types of Disbursement in FY 2005 (by %)

Types %
Mosques 45%
Education 26%
Madrasah 13%
Religious

10 Source: Total assets value of all waqf managed by Muis and trustees.
11 Waqif- person who created the waqf.

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 Contemporary Waqf Administration And Development In Singapore:
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School)
Poor and 9%
Needy
Others 7%
Total 100%

Most of the awqaf are created for the purpose of building and maintenance
of mosques. The madrasah is another popular intention of the wakif,
followed by the poor and needy.

MUIS also plays the regulatory role of managing the waqf. Guidelines on
the usage of properties and on sale and purchase of properties have been
incorporated.

MUIS has obtained the ISO9001 certification for the administration and
management of waqf in Singapore. This is a major effort as it strives to
be one of the best waqf authorities in the world.

WAY FORWARD FOR THE ADMINISTRATION AND

DEVELOPMENT OF AWQAF

The landscape for the management and development of waqf has changed.
Muslim communities and countries are now interested to develop its waqf,
and this interest is heightened by the potentials the waqf creates. In the
Middle East and many other Muslim majority countries waqf forms a huge
land bank with high potential for development.

Waqf is an institution to help promote social justice, community

development, educational upliftment and poverty alleviation. It is a tool,
in addition to Zakah, to promote and enhance religious and social
development. We trust that awqaf authorities in Muslim countries view
waqf development and its effective management as a way of promoting
social and religious development and encouraging a caring and giving
community.

We acknowledged that there are impediments such as bureaucracy, lack of

expertise and the need to revisit religious rulings on waqf, in order to
realize the true intent and spirit of awqaf.

Hence we hoped that academics, religious scholars, the awqaf authrioties,

the practitioners, the developers, and financial institutions would work
together to synergise efforts and to bring forth creative ideas, methods and
initiatives for the development of waqf locally and globally.

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 Contemporary Waqf Administration And Development In Singapore:
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It is also hoped that Muslim communities will continue to create even

more waqf as a way of contributing to humankind and society as
encouraged by Islam.

“ Verily Allah enjoins Al-Adl and Al- Ihsan , to help mankind and forbid
evil and wrongdoings and any oppression. He admonishes you, that you
may take heed.”

Quran: An- Nahl , 16:90

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 Contemporary Waqf Administration And Development In Singapore:
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ANNEX 1

Musharakah Bond Structure

Financing of 11 Beach Road and Bencoolen Street Service Apartments

Using the Musyarakah Bond Structure

11 Beach Road – Through Asset Migration Exercise

MUIS as Bond Issuer
Musharaka Partnership
$x mil $x mil
73.5% Share Investors MUIS Wakaf Fund 26.5% Share
$x mil $x mil
Return (Interest & Dividend) Advance $34 mil
$x mil
SPV1-Head lessee
SPV1 to guarantee rental
renturn to SPV2
Rental $x Ijara Agreement
SPV2 SPV2 serves as the
co which will
manage the Assets
and gives return to
Gross Revenue $x the investors.

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 Contemporary Waqf Administration And Development In Singapore:
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Redevelopment through Partnership – final ownership

MUIS/Baitumal (title) and

MUIS (Wakaf)
Warees (beneficiary)

Serviced Commercial
Apartments & Mosque

Musharaka
Arrangement

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 Contemporary Waqf Administration And Development In Singapore:
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Musharakah structure for the development at Bencoolen Street

Redevelopment through Partnership – Bencoolen St Project

Investors
Issues S$35m
Musharaka Bonds Proceeds

MUIS (Baitumal) Warees MUIS (Wakaf)

Financial resources of Managerial and financial Land (S$xMil) & financial

S$35m resources of S$x resources of S$xMil

Musharaka
Arrangement

Bencoolen St
Development

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 Contemporary Waqf Administration And Development In Singapore:
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Redevelopment through Partnership – distribution of return

Investors
Return on Musharaka
Bonds
~3.5%

MUIS (Baitumal) Warees

Profit sharing of
balance at 70:30*

Ijarah Contract
Serviced Ascott International
Apartments
Guaranteed Income
Yr 1 to Yr 10

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